The Kroger Co. (KR), Whole Foods Market, Inc. (WFM): Should This Stock Be in Your Shopping Cart?

Page 1 of 2

If you’re looking for an exciting investment, then it’s not likely that you’re going to look at The Kroger Co. (NYSE:KR). After all, the company has been around since 1883. If you’re not familiar with Kroger, then this might conjure up images of horse-drawn carriages, men wearing top hats, women in full skirts, and dust balls. However, Kroger has managed to change with the times incredibly well.

The Kroger Co. (NYSE:KR)

For example, The Kroger Co. (NYSE:KR) continues to increase market share annually despite increased competition from unique-concept stores such as Whole Foods Market, Inc. (NASDAQ:WFM).

The Kroger Co. (NYSE:KR) only increased its market share 0.2% in 2012, but any market share improvement is a positive as it’s better than the alternative. Let’s take a look at some other reasons why Kroger might offer a solid investment going forward.

Aggressive management

In a time where competition is fiercer than ever and the consumer is weak, The Kroger Co. (NYSE:KR) doesn’t back down. If anything, this company seems to use these challenges as motivation. Kroger is consistently expanding its store base, which has helped increase market share. Days ago, it purchased Harris Teeter Supermarkets Inc (NYSE:HTSI) for $2.5 billion, which broadens Kroger’s exposure in Mid-Atlantic and Southern states.

An important aspect of this acquisition is that Harris Teeter Supermarkets Inc (NYSE:HTSI) is an upscale brand that can be found in affluent areas. High-income consumers haven’t suffered from the economic slowdown nearly as much as middle-income consumers. Many high-income consumers have made strong comebacks through investments.

Even if high-income consumers take a hit, most of them will still choose to shop at Harris Teeter Supermarkets Inc (NYSE:HTSI) opposed to other local supermarkets. Once shoppers become accustomed to high quality and cleanliness in regards to food shopping, they’re not likely to leave. On the other hand, they might decrease their spending.

Prior preparation

Part of the reason The Kroger Co. (NYSE:KR) has come back to life after sub-par performance for the better part of a decade is its joint venture with dunnhumbyUSA — a consumer insight company. This partnership has allowed Kroger to better understand, and sometimes predict, consumer trends. This, in turn, has helped lead to an increase in loyal shoppers, margin expansion, 38 consecutive quarters of increased same-store sales, confidence in long-term earnings growth potential, and the ability to return capital to shareholders through buybacks and dividends.

The Kroger Co. (NYSE:KR) currently yields 1.7%. You can find a better yield in the space, but it might not be a better investment. Let’s check it out.

Kroger vs. peers

Kroger has consistently increased revenue and earnings over the past several years. Earnings have been inconsistent, but Kroger always delivers profits. It was even capable of accomplishing this goal in 2008 and 2009. Kroger’s profit margin of 1.6% isn’t spectacular, but with 1,883 stores (and counting) throughout the United States, high volumes make up for it.

Debt is the only real concern for Kroger as it sports a debt-to-equity ratio of 1.7 — higher than the industry average of 1.2. This might reduce the likelihood of increased capital to shareholders and acquisitions in the near future, but it shouldn’t impact the company’s growth potential.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!